Microsoft's earnings shine ahead of new product wave
April 20, 2012
First Published: 17:36 IST(20/4/2012)
Last Updated: 19:24 IST(20/4/2012)
Microsoft posted quarterly net income of $5.11 billion on record-high revenue on the cusp of what executives billed as a huge "product launch wave" promising even better days ahead.
A worker prepares the logo on the Microsoft stand on the CeBIT computer fair in Hanover. Credit: Reuters/Tobias Schwarz
"We're driving toward exciting launches across the entire company, while delivering strong financial results," chief executive Steve Ballmer said as the earnings results were announced on Thursday.
"With the upcoming release of new Windows 8 PCs and tablets, the next version of Office, and a wide array of products and services for the enterprise and consumers, we will be delivering exceptional value to all our customers in the year ahead."
The software titan's stock price quickly jumped more than three percent to $31.98 a share after the release of results that beat Wall Street predictions and boasted unprecedented third-quarter revenue of $17.41 billion.
Microsoft's profit for the three months ending March 31 was slightly less than the $5.23 billion seen in the same period last year.
Sales of programs tailored for businesses and interest in software hosted as services in the Internet "cloud" lifted revenue despite overall weakness in the consumer market and softened demand for Xbox 360 videogame consoles.
Money taken in by the company's Entertainment and Devices Division (EDD) that had been ablaze due to Xbox and its Kinect gesture-and-voice control accessory dropped 16 percent to $1.6 billion.
Microsoft expected revenue in the EDD to grow in the current fiscal quarter.
"We feel really good about our market position and strategy," chief financial officer Peter Klein said in an earnings conference call.
Xbox is going beyond videogames to become a preferred way to get films and other entertainment content from the Internet.
Executives said that they were also encouraged by signs that slim, high-powered "ultrabook" laptops based on the latest Windows operating system are igniting consumer demand.
"We continue to execute well across our businesses, and we are seeing robust demand for our enterprise products and services," said Microsoft chief operating officer Kevin Turner.
"Our investments and offerings in the database platform and public, private, and hybrid cloud are helping our customers transform their operations to meet today's evolving business demands."
The months ahead are seen as pivotal for Microsoft. The Redmond, Washington-based colossus is slated to release a new version of its Windows personal computer operating system and a preliminary version of Office.
Industry trackers are watching the Windows Phone platform that has failed to carve out much territory in a booming smartphone and tablet market dominated by Apple and Google-backed Android gadgets.
"We are working to bring Windows Phone to more people," Klein said.
Building a meaningful "ecosystem" of applications and content for Windows mobile devices is essential, according to Klein, who added that the number of Windows Phone "apps" rose 50 percent in the past three months.
Microsoft's strategy includes an alliance with mobile phone veteran Nokia and giving developers money, handsets or other incentives to develop applications for Windows Phone platform.
The integration of Internet telephony pioneer Skype into Microsoft is proceeding apace and executives were confident features would be hits with customers.
Microsoft last year made an $8.5 billion deal to buy Skype in a move that promised the approximately 170 million users of the service would be able to "Skype" using Windows-powered phones or even Xbox game consoles.
More than a billion minutes of calls were logged at Skype in the recently-ended quarter.
Microsoft executives said that they were also devoted to improving market share and advertising revenue at Internet search service Bing.
The solid revenue growth and better-than-expected profit came with Microsoft set to kick off one of its "biggest launch years."
"With an unprecedented refresh of the Windows product line... we expect to take share as businesses maximize IT infrastructure," Klein said.
"Consumers will see ongoing innovation in Xbox, Skype, Windows phone and Bing," he continued. "Our product portfolio is stronger than it has ever been."